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The Smith Manoeuvre: Turning Your Mortgage into a Wealth Building Tool

A photo of the Smith Manoeuvre book


If you’re a homeowner with a mortgage, you’re already familiar with the concept of borrowing money to make a big purchase. But what if you could use that debt to build wealth instead of just paying it off? Enter the Smith Manoeuvre, a Canadian financial strategy that allows you to turn your mortgage into a tax-deductible investment loan.

What is the Smith Manoeuvre?

The Smith Manoeuvre is a financial strategy that involves borrowing funds against the equity in your home and reinvesting them in income-generating investments such as dividend-paying stocks, exchange-traded funds (ETFs), or mutual funds. The idea is to use the investment income to pay off your mortgage faster, while also deducting the interest on the borrowed funds from your taxes.

How does the Smith Manoeuvre work?

To implement the Smith Manoeuvre, you’ll need to have built up equity in your home, which can be achieved by making mortgage payments over time or through a larger down payment. You’ll then need to apply for a home equity line of credit (HELOC) or readvanceable mortgage, which allows you to borrow against the equity you’ve built up in your home. Once you have access to the funds, you can use them to invest in income-generating assets.

The investment income generated from your portfolio can then be used to pay down your mortgage, which in turn increases the amount of equity you have in your home. As your equity grows, you can borrow more against it, allowing you to invest more and potentially earn even greater returns.

Potential Benefits of the Smith Manoeuvre

The Smith Manoeuvre offers several potential benefits, including:

  • Tax deductions: By deducting the interest on the borrowed funds from your taxes, you can potentially save thousands of dollars each year.
  • Increased wealth: By reinvesting the borrowed funds in income-generating assets, you can potentially earn greater returns than you would by simply paying down your mortgage.
  • Faster mortgage payoff: By using investment income to pay down your mortgage faster, you can potentially become debt-free sooner than you would through traditional mortgage payments.
  • Flexibility: The Smith Manoeuvre allows you to choose your own investments, giving you greater control over your financial future.


The Smith Manoeuvre isn’t for everyone, and it’s important to understand the risks and potential downsides before implementing it. However, for those who are financially savvy and willing to take on some risk, it can be a powerful tool for building wealth and achieving financial freedom. As with any financial strategy, it’s important to do your research and consult with a financial advisor to determine if the Smith Manoeuvre is right for you.

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